Expanding Domestic Solar Supply Chain Will Create Significant Market Opportunities

Key Takeaways

• Strategic focus on domestic solar supply and TOPCon technology positions T1 Energy for increased demand, improved margins, and larger U.S. market share.
  
• Long-term commitments and capacity expansion could ensure stable revenue streams and future earnings growth.
  
• Uncertainty in trade policy, tax changes, and supply chain issues may stifle growth, complicate partnerships, and impact revenue, earnings, and liquidity.

Catalysts

Provides energy solutions for solar and batteries in the United States and Norway.

• T1 Energy is focusing on developing a domestic solar and battery supply chain, which aligns well with U.S. policy initiatives like the Inflation Reduction Act. This focus on domestic content is expected to increase demand for T1's products and potentially improve revenue and net margins due to favorable tax incentives.
  
• The conversion of some production lines to TOPCon technology is aimed at enhancing product competitiveness and aligning with customer demand. This strategic move could lead to higher sales volumes and improved revenue as it captures a larger market share within the U.S.
  
• Their ongoing negotiations for long-term, take-or-pay module purchase commitments with utilities and developers indicate potential for stable and predictable revenue streams, which could positively impact earnings.
  
• The development of the G2 Austin U.S. solar cell manufacturing facility is expected to add significant capacity. This expansion could drive future growth in revenue and earnings once it becomes operational.
  
• Cost-cutting measures related to the European wind-down and portfolio optimization may lead to improved net margins and earnings by reducing operating expenses and possibly extracting value from legacy projects.

T1 Energy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming T1 Energy's revenue will grow by 299.0% annually over the next 3 years.
• Analysts are not forecasting that T1 Energy will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate T1 Energy's profit margin will increase from -84.8% to the average US Electrical industry of 10.2% in 3 years.
• If T1 Energy's profit margin were to converge on the industry average, you could expect earnings to reach $438.3 million (and earnings per share of $2.29) by about May 2028, up from $-57.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 1.8x on those 2028 earnings, up from -3.2x today. This future PE is lower than the current PE for the US Electrical industry at 22.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

T1 Energy Future Earnings Per Share Growth

Risks

• The uncertainty around U.S. trade policy, including anti-dumping and countervailing duties, creates visibility issues for material costs, impacting the ability to accurately bid contracts, which could affect revenue and earnings.
  
• Proposed changes in energy tax provisions and language on foreign entity concerns may stifle growth and complicate relationships with key partners like Trina, potentially affecting net margins and revenue.
  
• Lowered production guidance due to market uncertainty and integration challenges signifies potential issues in meeting sales targets, which could lead to reduced revenue and profit margins.
  
• The strategic decision to avoid merchant sales amid tariff and pricing uncertainties may limit short-term cash flow, impacting liquidity and overall earnings.
  
• Potential detentions and project risks due to supply chain and policy changes could disrupt operations and lead to increased operational costs, affecting net margins and earnings.

Valuation

• The analysts have a consensus price target of $3.0 for T1 Energy based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.3 billion, earnings will come to $438.3 million, and it would be trading on a PE ratio of 1.8x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of $1.18, the analyst price target of $3.0 is 60.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.